The planned privatisation of the payments system was the basis of Labor’s Mediscare campaign during the election, which raised fears the government was planning to privatise the system that provides subsidies for medical care.

While stressing that the government would continue to run the system, Mr Giles said the new system would be “codesigned” with the private sector.

The system that delivers Medicare rebates is 30 years old and will be obsolete within three years.

Mr Bowles says if the system fails the government would not be able to make payments to doctors, patients or other health providers.

The Department of Health was in the first phase of consulting stakeholders about how to build the new system, he said.

Liberal Party federal director Tony Nutt told the National Press Club last month Labor’s Mediscare campaign cost the government seats at the election.

It was aimed at poorer, older voters who feared they may lose access to free health care.

“The really outrageous aspect of the Mediscare was that it was coldly, ruthlessly and callously targeted at vulnerable Australians,” Mr Nutt said.

“The Mediscare campaign affected votes and seats and contributed to the defeat of a number of MPs by reaching a new low, cynically and cruelly exploiting some of the most vulnerable in our society.”